We maintain our NEUTRAL rating but cut DCF-based TP to Bt7.5 (from Bt9.5) after cutting 2023F to a Bt4.6bn loss (from Bt3.1bn profit) to reflect a 3.4% cut in 2023F revenue and adjustment for extra items after 1H23 results. We expect its bottom line to continue to be in the red in 2H23. TRUE share price has risen to pre-election level, implying that the market has already priced in greater clarity on the formation of a new government.
Net loss worsened in 2Q23. TRUE reported a net loss of Bt2.3bn, sinking further from a net loss of Bt492mn in 1Q23 and Bt2.6bn profit in 2Q22. It had multiple extra items in the quarter, with a net negative of Bt55mn subtracted from the bottom line. Removing these showed a core loss of ~Bt2.3bn, far below consensus forecast of a Bt643mn loss. Behind the weakness was a YoY fall in mobile revenue, a worse margin on product sales and higher depreciation expenses. 1H23 showed a net Bt2.8bn loss against our previous 2023 forecast of Bt3.1bn profit.
Service revenue slightly better QoQ, not YoY. Mobile service revenue (64% of total revenue) was Bt31.3bn, inching up 0.4% QoQ, but slipping 2% YoY. Blended ARPU is beginning to see a positive sign, stabilizing QoQ at Bt201/sub/mth. Net adds were 659k, driven by 669k prepaid net adds. It is interesting to note that postpaid net adds have been negative for two quarters. Overall, mobile subs reached 51.1mn and 5G subs are now at 8.3mn from 6.3mn last quarter. Online service revenue (12%) was Bt5.9bn, up 5.4% QoQ and 0.7% YoY, backed by the removal of discounts and utilizing cross-selling opportunities arising from the amalgamation. We also see a good sign in ARPU for this business, which grew 2.5% QoQ to Bt475/sub/mth. Pay TV service revenue (3%) was Bt1.6bn, down 5.9% QoQ and 4.7% YoY due to lower subscription and installation revenue.
Neutral tone at analyst briefing. The company revised up EBITDA guidance to low to mid single-digit growth from a flat to low single-digit decline, but this is largely the result of a one-time benefit of Bt1.3bn booked at the EBITDA level in 2Q23. Management expects mobile revenue to continue to grow QoQ and also show YoY growth in 2H23 off last year’s low base and the ongoing positive effect of easing competition. However, we expect only slow recovery due to the nature of the telecom business. Management also highlighted that the surge in depreciation expenses of 10.3% QoQ and 12.5% YoY to Bt17.8bn in 2Q23 was due to the realignment of asset useful life (previously 10 years for DTAC and 20 years for TRUE).
Risks and concerns. The resumption of mobile business pricing competition.
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